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Case Study: RedStone Oracles Provides swETH Feed for Swell Network

What is Swell?

Swell is a decentralized liquid staking protocol dedicated to offering top-tier liquid staking experiences, streamlining DeFi access, and bolstering Ethereum’s future. Swell enables users to generate passive income by staking ETH, earning blockchain rewards, and obtaining a yield-bearing liquid staking token (LST). Users can either hold this LST or engage with the broader DeFi ecosystem to earn extra yield.

What is swETH?

When a user stakes their ETH to the Swell swETH contract, the ETH equivalent in Swell’s liquid staking token swETH is minted to the user. The ETH in the swETH contract is sent to the Deposit manager contract to be pooled until there is enough for at least a 32 ETH deposit. The next validator(s) in the registry contract is then selected via round robin and a deposit is made into the Ethereum deposit contract with a validator key(s). The validator is then in a queue to be activated in the consensus layer for the node operator to begin attesting transactions and proposing blocks.

swETH mechanics

Swell’s swETH is not a rebasing token. Instead, it is a reward-bearing token, meaning that the value of the tokens increases to reflect the accumulated staking yield — avoiding the creation of potentially taxable transactions.

Swell’s Problems as LST

The exact obstacles and limitations related in most to the nature of the oracle offerings in the market today coupled with Swell’s progression in the LST market, specifically:

(a) limited reliable options in the market,
(b) requirements to establish robust and deep liquidity on swETH, and
(c) a lack of universal standards and information around oracle requirements for LSTs across the ecosystem.

Implemented Solution

Implemented Solution for Swell

RedStone Team implemented a price discovery mechanism based on 3 most liquid DEX’es where swETH tokens were deployed: 

  1. Balancer: SwETH/Boosted Aave V3 WETH (0x02d928e68d8f10c0358566152677db51e1e2dc8c)
  2. Uniswap V3: UniV3 ETH/swETH pool (0x30ea22c879628514f1494d4bbfef79d21a6b49a2)
  3. Maverick: Maverick ETH-swETH pool (0x0ce176e1b11a8f88a4ba2535de80e81f88592bad)

We also prepared a liquidity monitoring service to rearrange the pools in case of changes in the amount of deployed tokens to mitigate the attempts to manipulate the price. 

In the final step, we facilitated the deployment of multiple data provider nodes, relayer nodes and monitoring services to actively track the operations of data-providing infrastructure.

The Future of Swell x RedStone Oracles Partnership

Our aim is to actively promote the use of the price feed, a critical tool for traders, analysts, and developers that provides up-to-date, reliable, and accurate pricing information across various markets. We seek to integrate projects that wish to utilize our SWELL platform, e.g.:

providing them access to precise and current market data. In doing so, they can make better decisions, enhance the efficiency of their operations, and ultimately accelerate their innovation.

Exclusive Interview with Swell Team

Our speaker was Daniel Dizon, Swell Labs CEO & Founder.

Can you describe your oracle problem in a few sentences?

We are an up-and-coming Ethereum LST protocol and one of the fastest growing protocols in DeFi.  One of our primary objectives as an LST is having Swell ETH (swETH) recognized as robust, reliable, and quality collateral across the ecosystem. This push requires that we solve for oracle problems which are inherent in effectively all on-chain crypto-economic primitives seeking to increase composability and use across money legos.

Specifically, in our case, we utilize Redstone’s decentralized oracle network to establish and maintain a secure, reliable, and accurate secondary market price feed swETH across multiple DEXs. With this oracle now in place, swETH’s use case broadens to other important DeFi market categories such as collateralized debt positions (including stablecoins), as well as borrow/lend protocols and money markets.

Why have you decided on RedStone?

We decided to go with Redstone as part of Swell’s push to drive as much utility, composability, and accessibility to swETH. Establishing a secure and decentralized oracle feed for swETH was made possible with Redstone’s technology.

Redstone also has novel and efficient ways of getting data on demand that we and our protocol partners require as part of developing new and interesting strategies in DeFi such as LST-backed stablecoin issuance, leveraged staking, and more.

How did the integration process look on your end?

Since the mainnet launch, Swell has been rapidly gearing up to have swETH recognized as collateral across DeFi. The Redstone integration marks an important milestone in Swell’s concerted efforts in this direction. 

Overall, the process was very simple and hands-off for our team, and we look forward to continuing to work with Redstone.

About RedStone

RedStone is revolutionizing the Oracles industry by implementing novel modular design and 3 tailor-made data consumption models. You can build the new generation of DeFi & Web3 protocols based on RedStone’s versatile data offering of long-tail, LP, LST, and Ecosystem-native tokens, as well as Real World Data and custom feeds.

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